The California Supreme Court on Monday delivered a double whammy to Silicon Valley environmentalists and cash-strapped cities and counties around the state.

The Supreme Court struck down a special fee on Santa Clara County property owners meant to pay for open-space acquisition, possibly wiping out a $56 million reserve collected over the past seven years.

The decision came in a case that has been closely watched across California, as local government officials have struggled to find new ways to pay for mosquito control, street improvements and other community needs.

The county’s Open Space Authority established the property assessment in 2001 to acquire open space from Milpitas to Morgan Hill. After property owners in the area approved the fee in a mail-only vote, 300,000 of them began paying $20 more per year.

But the justices found that the assessment violated Proposition 218. The 12-year-old law is known as the “Right to Vote on Taxes Act” because it was designed to limit local governments’ ability to raise revenue without voter approval.

The court said that since the broad land-acquisition plan in theory benefited the entire community, not just property owners who bore the burden of the fee, the assessment should have been put to a countywide vote.

The open-space agency still receives several million dollars under a separate, $12-a-year assessment, which was imposed in 1994 before Proposition 218 went into effect. But the unanimous decision is expected to paralyze efforts to secure more land and may force Open Space Authority officials to refund the $56 million to property owners, although no decision has been made on whether that money will be returned. The court did not address the fate of the money collected.

“It pretty much puts near-future acquisitions in a state of limbo,” said Patrick Congdon, the authority’s general manager.

The Supreme Court sided with the Silicon Valley Taxpayers Association, which sued to block the property assessment, arguing that it amounted to a tax.

‘An illegal tax’

Taxpayer groups say cities and counties are skirting Proposition 218 to avoid asking voters to approve new revenue – far more difficult because new taxes require a two-thirds vote. Doug McNea, president of the Silicon Valley Taxpayers Association, vowed to push the open-space agency to refund the assessment, calling it “an illegal tax.”

Meanwhile, Santa Clara County Counsel Ann Ravel called the ruling “problematic” if the county moves to assess fees for other services – such as a proposal to charge a phone fee to help pay for 911 service. San Jose already has such a fee, which has been placed in doubt by a separate court fight.

San Jose City Attorney Rick Doyle said the Supreme Court’s ruling does not bode well for the legal battle over the 911 fee or other fees the city might seek to impose.

“This one is not so good for local governments,” Doyle said. “This court is very conservative in how it interprets Prop. 218.”

Monday’s ruling overturned a San Jose-based appeals court, which upheld the open-space fee in 2005. The Supreme Court concluded that the fee was illegal because the district failed to specify how the money would be spent and was targeting a broad plan.

Open-space officials argued that the fee increase complied with Proposition 218 because affected property owners voted in favor of the assessment after a series of public hearings. But the Supreme Court said the vote was inadequate for a spending plan as broad as preserving open space across the county.

Lawyers on all sides of the issue say local governments now may be forced to turn to voters to approve revenue hikes, unless the assessments are clearly targeted for specific improvements in specific neighborhoods.

Taxpayer advocates say the ruling simply prevents local officials from making an end-run around Proposition 218.

“This was basically a test case,” noted Harold Johnson, an attorney with the Pacific Legal Foundation, which sided with the Silicon Valley Taxpayers Association. “Our concern was that the county’s strategy here would set off a trend up and down the state.”

Statewide concerns

Most open-space districts have not used the Santa Clara County model to pay for acquisitions. But other California city and county agencies filed briefs with the Supreme Court, expressing concern about limits on their ability to raise money. For example, mosquito-control agencies, including Santa Clara County’s, said they rely on special assessments on property owners to pay for spraying programs.

For now, the ruling puts a crimp in local efforts to buy open space and stave off development, prompting concerns from environmental groups. Those groups had hoped some of the money could have been used to preserve land near the Mount Hamilton range, around Henry Coe State Park and into the Coyote Valley.

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